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19 March 2024

Which Dubai communities saw biggest rent declines

Tenants will have to pay for their unit's air-conditioning, which was previously paid for by their landlords. (FILE)

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By Parag Deulgaonkar

Rents in Dubai are falling with Discovery Gardens and International City, two of the most affordable communities in the emirate, registering a decline of seven per cent in the third quarter 2014 compared to the second quarter, a new report by Asteco, a property consultancy, reveals.

The two residential communities, which saw declines, are however, up 23 per cent and 40 per cent, respectively, on an annual basis.

A studio apartment in Discovery Gardens is being leased for Dh45,000 to Dh52,000 per annum (pa), one bed for Dh60,000 to Dh72,000 pa and two-bed for Dh80,000 to Dh90,000 pa.

In International City, rents for studios range between DhDh33,000 to Dh38,000 pa, one beds between Dh44,000 and Dh48,000 pa and two-beds between Dh62,000 and Dh68,000 pa.

Asteco believes that there is a possibility of “further rental increases” for these communities as per the Real Estate Regulatory Agency’s (Rera) rental index, which could prompt “further relocations to the Northern Emirates”.

However, Rera’s rental index puts lease rates for studios in Discovery Gardens in the range of Dh40,000 to Dh45,000 pa, one bed Dh55,000 to Dh65,000 pa and two-bed Dh70,000 to Dh85,000 pa, which is almost 5.5 to 11.1 per cent lower than Asteco rates.

Similarly, the index puts rents for studios in International City between Dh30,000 to Dh35,000 pa, one bed Dh35,000 and Dh45,000 pa and two-bed Dh45,000 and Dh55,000 pa -- 9 to 19 per cent lower than Asteco rates.

Rents in the upscale Dubai Marina fell 2 per cent, with tenants relocating to more accessible areas due to long-term construction work and traffic congestion in the community.

A studio apartment in Dubai Marina is being leased for Dh70,000 to Dh85,000 per annum (pa), one bed for Dh90,000 to Dh120,000 pa, two-bed for Dh135,000 to Dh185,000 pa and three-beds for Dh150,000 to Dh270,000 pa.

Downtown Dubai, JLT remain stable

Rents in Downtown Dubai and Jumeirah Lakes Towers remained stable but Palm Jumeirah registered a three per cent increase quarter-on-quarter due to restricted supply and growing demand.

A two-bedroom apartment in JLT is currently leasing for between Dh120,000 and Dh150,000 while in Downtown Dubai Marina its costs between Dh150,000 and Dh190,000 pa.

Villas registered an average overall three per cent decline with the Springs declining by eight per cent while Arabian Ranches and Mirdif both down by five per cent since Q2 2014, which Asteco believes is due to the impact of more affordable supply coming on stream in other communities such Jumeirah Village and Dubailand.

A three-bedroom villa in Arabian Ranches and Springs is renting for Dh170,000-Dh260,000 pa and Dh180,000-205,000 pa currently, while the same in Jumeirah Village community can be secured for Dh145-180,000 pa.

Villa rentals down 3%


Overall, Asteco said apartment and villa rental rates dropped slightly by 2 per cent and 3 per cent, respectively against second quarter figures, with sales prices too showing a nominal decline of one per cent and four per cent respectively. However, year-on-year growth remained positive with a 31 per cent and 17 per cent increase in sales prices for apartments and villas.

“For the first time since 2012 we have seen both residential rental rates and sales prices decline as a result of a natural adjustment to on-going new supply entering the market,” said John Stevens, Managing Director, Asteco.

“The impact of mortgage cap and higher transaction fees is also making it more expensive for prospective buyers to get onto the Dubai property ladder.”

The UAE Central Bank mortgage cap (75 per cent for expatriates and 80 per cent for UAE nationals) has continued to restrict demand, exacerbated by the higher down payment requirement and four per cent Dubai Land Department transfer fee (previously 2 per cent).

“It’s a wait-and-see scenario on the part of buyers right now, and we believe that sales prices may soften further with more new supply on the way. In the short term, a price reduction will be beneficial for the market as it will assist in unlocking demand from the middle income segments of the population,” Stevens added.